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Household incomes suffered the biggest fall in a quarter of a century last year, new figures show.

Expert: Howard Archer (Picture: Handout)

Disposable incomes in 2011 dropped 1.2 per cent, the biggest decline since 1977 when Elvis Presley died, the Office for National Statistics said.

Britainâs gross domestic product, the measure of the economyâs size, shrank by 0.3 per cent in the last quarter of 2011.

The figure is more than the 0.2 per cent it was estimated to have shrunk by during that period.

A decline in Britainâs key servicesÂ sector is responsible and household spending was lower than economists predicted.

The governmentâs independent watchdog, the Office for Budget Responsibility, estimates growth of just 0.8 per cent for 2012.

But George Osborne has often said his policies and austerity measures wonât be âblown off course by bad financial newsâ.

Howard Archer, economist at IHS Global Insight said: âIt does not fundamentally change the story of an economy that saw fitful and muted overall growth in 2011, with a relapse in activity at the end of the year.

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‘Attention is now firmly focused on whether the economy has returned to growth in the first quarter and if it has, can it build on that in difficult conditions,â Â

Shadow chancellor Ed Balls said: âThese revised figures also show that since George Osborneâs spending review our economy has flatlined and not grown at all.

âThis slow growth and rising unemployment means the government is set to borrow an extra Â£150billion to pay for the cost of economic failure.â